The Crux of our Economic Woes

The crux of our economic woes lay in the fact that over the last several decades we have created entitlement societies on the back of the industrial revolution, technological advantages, capital accumulated from the colonial era, and the domination of global finances. Promises were made on the assumption that those advantages would continue in both Europe and US, and that ever greater prosperity and entitlements would be sustained through debt financed consumption growth. In that eerie fantasy world, debt fueled consumption was to be the catalyst to bring about ever more growth.

Now reality has begun to come into focus and it is becoming apparent that this is unsustainable. The entitlements and promises that have piled up have become overwhelming. The populations of the worlds most advanced nations were led to believe the good times would never end, but suddenly their core advantages in technology, capital, and productivity have started to erode. Now they find they are lagging behind several emerging countries. Manufacturing jobs have steadily gone elsewhere, replaced by low skilled service jobs, this has removed the supports from our debt fueled prosperity showing it to be unsustainable and flawed.

While told that we were moving up the value chain in reality the opposite was true. The trends of prior years coupled with debt fueled prosperity and consumption growth led many to believe that their future would be secure. By moving towards "higher value adding activities" we would continue to lead the emerging and developing countries. This has proved false and the economies built on those false assumptions are now crashing down. Merely addressing the symptoms of our malaise as "financial problems", a tactic being tried by  leaders, central banks, and the IMF, will only raise false hope. In the end it will not avert the economic and political upheaval before us.

Debt has repeatedly caused  problems throughout history, but its potential for disrupting our economic system has grown tremendously because new technologies have allowed us to weave and create a framework of  relationships that increase the likely-hood of contagion. This growing web of interdependence leaves us vulnerable to a failure of the very systems on which we have come to depend. This flawed concept has now become the bedrock and foundation of our society. When coupled with the issue of our unsustainable economic and population growth it is clear we are reaching a point where many of the problems we face can no longer be pushed forward.

Denying these problems will result in creating a precarious situation that requires a massive shift in future lifestyles over a very short and painful time-frame. The failure for countries to address their long term debt problems coupled with the number of  growing people nearing retirement with little in the way of saving bodes poorly for the economy going forward. Big changes in Medicare that are occurring under the radar also should raise concern. If and when a deep hit to the system takes place we could suffer the triple threat, and as confidence falls the credibility, and the competence of those in charge will be called into question. If this happens the fabric of society may be severely challenged.



Footnote; As always your comments are welcome and encouraged. In a separate post I chronicle the 10 most pressing and important problems facing our world, these are increasingly more menacing in that we live in a rapidly changing world that gives us little time and less room to react and set straight the mistakes of our past. The link can be found below,
                     http://brucewilds.blogspot.com/2013/11/the-worlds-10-worst-problems.html